Seven Businesses Push into FY'05

Success through product and geographic segmentation, tactics to compete against Linux, and the potential for growth in emerging businesses were among the themes at Microsoft’s Financial Analysts Meeting in July 2004. With few major product releases slated for fiscal year 2005 (which began July 1, 2004), spokespeople for Microsoft’s seven businesses focused mostly on general opportunities and threats rather than specific products or technologies. Executives also tried to convince analysts that Microsoft is still an innovative company capable of significant profit growth.

(For a chart showing FY’04 revenue results and FY’05 revenue predictions for each business, see “Seven Businesses: FY’05 Overview“.)

Client: Segmentation, Piracy Prevention

FY’04 revenue growth in the Windows Client business, Microsoft’s largest and most profitable segment, nearly doubled expectations, coming in around 12%. Although profits declined slightly, this was primarily due to the effects of the Sun Microsystems settlement and a one-time program to buy back “underwater” stock options—without these events, profits would have been up about 13%. (For details on how these events affected each business unit’s profit and loss, see the chart “Profits Affected by Nonrecurring Events“.) The company expects Client revenue growth to slow slightly in FY’05, to 5% to 7%, as PC sales growth slows.